Trade penalties of the climate policies

Moscow State Interest of International Relations (MGIMO) and the World Wildlife Fund published a paper with the results of their studies dedicated to the impact of the climate policies on the trade. Due to underestimation of the “green factor,” export plans of the Russian regions became quite vulnerable, Russian experts believe.

Russia had many times raised the issue of so-called “green” protectionism at various negotiations. Concerns in regards that the «green” progress inside the country will negatively affect country’s economy is a common thread going through Russian officials’ presentations.

Russia’s exporting plans are extremely vulnerable due to underestimation of the “green factor,” Russian experts claim. “Russian regions in the Northwest and Far East might be negatively affected by the development of the “green” economy in neighboring countries where the major Russian import flow is going to,” authors of the study claim.

The paper is the first experience of studying the potential influence of climate policies of Russia’s major trade partners (EU and Norway, the U.S., Japan, the Republic of Korea, China, etc.) on the export of a number of regions of the Russian North and Far East which have a high raw-material component. A part of the work is dedicated to an overview and analysis of the internal measures of the climate policies and of partners’ plans in this sphere.

Besides this, the paper presented an analysis of the information concerning the economy, export, and imports of particular regions from the point of view of potentially possible foreign countries’ restrictive measures. For the first time ever, assessments of the quota of “sensible” to these measures production in the export of particular regions had been made.

As it was pointed out in the paper, data from twelve Russian regions showed the risk of export decrease in relations with imposing of “green” regulations, i.e., regulations concerning reduction of greenhouse gas emissions in the importing countries. Percent of the export to the countries with active climate policies amounts to 78% for the Murmansk Region and 83% for the Arkhangelsk Region. In FEFD, the “carbon-sensitive” quota of export reached up to 80% by the 2011 data, while a record-setting index of 97% was registered in the Jewish AD.

In order to decrease the risk of export losses, we need to apply measures and incentives for reduction of the manufacturing carbon intensity. “In case we decline the policy for reducing greenhouse gas emissions, competitiveness of Russian companies will go down at the markets of oil and coals, ferrous and non-ferrous metals, cement, pulp and paper, air and marine shipping,” experts came to the conclusion.

“In the last years, the situation has changed cardinally,” Alexey Kokorin, Director of the WWF Russia’s “Climate and Energy” Program commented on the scholars’ job. “If previously national and local measures for regulating СО2 emissions were the specifics of Europe, now all our major partners, including China, Japan, and the U.S. are engaged in this tendency.”

“We are not saying that our trade partners will tomorrow impose protective measures, but we can clearly see the gradual process of forcing us out of the world market of goods due to exorbitantly high СО2 emissions per production unit,” WWF Russia Director on nature-protecting policies Dr. of geographical sciences Eugene Schwartz said. “With that, membership in WTO will not help us because it permits introduction of measures of ecological regulating.”

Authors of the study not only had analyzed the situation; they also gave recommendations to regional authorities and companies. Those include: adoption of measures for reduction of greenhouse gas emissions in the most “sensitive” industries, energy-intensive in the first place; diversification of the economy’s structure to the extent possible. This exactly measure should allow us to avoid trade restrictions, enhance export competitiveness, and improve the environmental situation. The paper’s authors proposed to implement the indicated tasks through modernization of manufacturing facilities including that through attracting investments from major national companies and transnational corporations.

The experts considered noticeable diversification of the markets for Russian regions’ exports quite improbable, taking into conditions the actual geographical structure of the world trade and the tendency of the growing degree of application of climate policy measures all over the world. In connection with this, the most perspective option should be gradual changes in the structure of product supplies and abandoning its purely raw-material orientation.

The experts recommended measures of ecological (climate) policies within the limits of regional authorities’ competences for reduction of carbon intensity of manufactured and exported production; e.g., regional initiatives on establishing a system of selling quotas on greenhouse gas emissions.

“We need outreaching climate policy and activities for developing the “green economy” assessible by clear quantitative indicators. Particularly, state corporations and state companies must have indexes of their energy efficiency and specific greenhouse gas emissions in their strategies and development plans,” Eugene Schwartz is sure.

The paper: